HSBC chief economist Stephen King is already thinking about the next recession.
In a note to clients Wednesday, he warns: “The world economy is like an ocean liner without lifeboats. If another recession hits, it could be a truly titanic struggle for policymakers.”
Here’s King (emphasis added):
Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery — both in the US and elsewhere — has been distinguished by a persistent munitions shortage. This is a major problem. In all recessions since the 1970s, the US Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out.
King notes that this far into the recovery, there’s a lack of “traditional policy ammunition.” For instance, Treasury yields have not risen, the budget deficit is not falling, and welfare payments are still on the rise.
The Emergency Election Sale is now live! Get 30% to 60% off our most popular products today!